Good morning, and welcome to Fluor's Fourth Quarter and Full Year 2025 Earnings Conference Call. Today's call is being recorded. [Operator Instructions] A replay of today's conference call will be available at approximately 10:30 a.m. Eastern Time today, accessible on Fluor's website at investor.fluor.com. The web replay will be available for 30 days. A telephone replay will also be available for 7 days through a registration link, also accessible on Fluor's website at investor.fluor.com. At this time, for opening remarks, I would like to turn the call over to Jason Landkamer, Vice President, Investor Relations. Please go ahead, Mr. Landkamer.

Thank you, Sarah, and welcome to Fluor's 2025 Fourth Quarter Earnings Call. Jim Breuer, Fluor's Chief Executive Officer; and John Regan, Fluor's Chief Financial Officer, are with us today. Fluor issued its fourth quarter earnings release earlier this morning and a slide presentation is posted on our website that we will reference while making prepared remarks. Before getting started, I would like to refer you to our safe harbor note regarding forward-looking statements, which are summarized on Slide 2. During today's presentation, we will be making forward-looking statements, which reflect our current analysis of existing trends and information. There is an inherent risk that actual results and experience could differ materially. You can find a discussion of our risk factors, which could potentially contribute to such differences in our 2025 Form 10-K, which was filed earlier today. During this call, we will discuss certain non-GAAP financial measures. Reconciliations of these amounts to the comparable GAAP measures are reflected in our earnings release and posted in the Investor Relations section of our website at investor.fluor.com. When discussing revenue and related margin, we are introducing disclosure for adjusted net revenue and adjusted net margin, which we determined by reducing GAAP revenue to exclude ad cost revenue, which we define in the 10-K. I'll now turn the call over to Jim Breuer, Fluor's Chief Executive Officer. Jim?

Thank you, Jason, and good morning, everyone. Thank you for joining today. I want to start by sharing my perspective on 2025, what's ahead of us in '26, why we're excited about our strategy and the business conditions supporting our growth. Please turn to Slide 3. When I think about our current state, it's helpful to reflect on the progression of our strategic journey over the past few years. We executed our Fix & Build chapter early in the decade where we prioritize actions critical to our long-term success. These included creating a robust capital structure, re-establishing disciplined pursuit principles and diversifying our mix of revenue. Last year, this management team launched the next chapter of our strategy, Grow & Execute with a focus on growth, project delivery and returning value to shareholders. Since then, we deployed $754 million in share repurchases in 2025, plus an additional $335 million to date in 2026. We achieved a monetization solution for our investment in NuScale with $2 billion received since September of 2025 and more to come in the next few months. We completed the sale of Stork and signed an agreement for the sale of the CFHI yard. We maintain our discipline around contract terms, ensuring that we get paid for the value we provide and we have much to be proud of in our 3 business segments. In Energy Solutions, in 2025, we completed several major projects successfully, including LNG Canada Phase I, TCO in Kazakhstan and BASF in China. In Urban, we expanded in key markets, including a major award related to the largest pharmaceutical project in the world, a rare earth project in the United States, copper and iron ore projects across multiple continents and a semiconductor tool install. And in Mission, we saw a significant extension for…

Thanks, Jim. Good morning, everyone. Today, I'd like to complete the picture of '25 results and share our view on the year ahead, including some thoughts on capital returns. Please turn to Slide 15. There are some key things to consider within our full year GAAP results, including: one, the $643 million charge related to Santos, which we booked as a reduction to revenue. Now in Q4, we saw a modest callback of $10 million as we further tightened the earlier estimates coming out of the judgment, and we saw more contribution from our insurance carriers. Two, we recorded $210 million in equity method earnings, driven mainly by our investment in NuScale and the Q1 NTTA impact. The accounting for NuScale in Q4 is very nuanced. So we'll comment more on that in a moment. Three, we recognized $108 million in cost growth across 3 infrastructure projects, including a $30 million effect during Q4. And finally, we had $43 million in restructuring costs to better optimize our operating platform for the current execution window. We recognized $16 million of this in Q4 with all year-to-date amounts included in our SG&A. Coming back to equity method in NuScale, because we had not completed the forward sale program until last week, we kept all 111 million shares on our balance sheet through year-end. The $2.2 billion loss in the quarter represents the $22 decrease in NuScale carried across all 111 million shares, but offset by the $200 million we recognized for the derivative asset associated with the forward sale which amounted to roughly $3 per share for the 71 million shares within the program. As I said, nuance. All in, our carrying value for the 71 million shares in the program completed last week was $1.2 billion, and we received $1.35 billion…

[Operator Instructions] Your first question comes from Steven Fisher with UBS.

Congrats on all the progress in 2025. Just to focus a little bit on the initial guidance. It seems like it was a little bit better than what you were thinking back in November, December when we're talking about sort of a flat to maybe modestly higher. Just curious kind of what changed. It sounds like maybe you're hearing a little bit of confidence from your customers. Just if you could talk a little bit about that? And then what specifically still has to happen to hit those targets? Are you acquiring some of these bookings in the second half to make a meaningful contribution.

Steve, this is Jim. Let me start and then I'll ask John to supplement. We feel good, Steve, where we are. We feel good about the diversity of prospects we have in front of us and the likelihood of converting, we are saying that a lot of the awards are going to come in the second half of the year. So the contribution for this year's income statement is going to be modest, I would say. So a lot of our confidence is also what's in backlog. And so it's a combination. But where we sit today in February, John, I would say in the 70% plus or minus, is already in backlog, maybe a little bit higher. The rest would have to come from what we call book and burn, Steve. But we feel, given the quality of prospects and giving the -- I would say the maturity of these opportunities, we feel pretty good about it. John?

Yes. I think you're spot on, Steve. In respect of what's coming from backlog for the EBITDA guide, Jim's right, it's probably in that 2/3 to 3/4 range. And the rest of it is kind of a comfortable book-to-burn for us based on kind of historical trends. So no major concerns there. And then look, I think the slightly uplift to guide is based on some of the confidence that Jim referenced and in part due to some better execution. We spent so much time talking about our problem projects. We forget that so much of the portfolio continues to execute at greater than as sold. And so as we're seeing uplift to margins in some of those backlog projects the drop-through into the income statement in '26 is meaningful.

The next question comes from Jamie Cook with Truist Securities.

And lots of accomplishments in 2025. Jim, I guess just my first question, it seems like the opportunity on power, as you said going forward relative to where we were last year, seems to have improved quite a bit. So is there any way you can help me understand, given the prospects you're seeing today, like what percent of your business could be power, let's say, in the next 3 years like on a backlog basis. And just are you seeing any improvement in terms and conditions with utilities, given they've historically been a difficult customer to work with before. Understanding the contract will be hybrid, cost plus then goes into fixed price, but just any commentary on the terms and conditions or competitive environment that makes you comfortable going in this market.

Jamie, let me answer first the second part of the question. The power market in the U.S. has evolved significantly in the last few years, driven by the huge demand for power. That translates into demand for reliable EPC services. And we have that. We have the experience to do these complex projects. And so in our conversations with the primarily utilities, they recognize that and the conversation is very different now. Like I explained, it's starting reimbursable, working together on the execution plan and the estimate and then converting to lump sum. And even that lump sum is going to have better conditions than what we saw 8, 9, 10 years ago. This is what we're calling smart lump sum where the risk allocation is properly balanced between both sides. I feel good about the power market. I think I can see ourselves executing at least 2 or 3 large projects simultaneously. We don't want to -- I mean, we like our diversification in Fluor. So we want to grow in Urban. We want to grow in Mission. We want to grow in Energy. The 2 large growth engines in energy are LNG and power. And in the shorter term, it's going to be gas-fired power. Again, a several small projects at the same time is what I would like to shoot for by '27. With this one confidential client that I mentioned, we're starting on 1 project, but the agreement is for an additional 2 sites. So we can -- you can see us managing that relationship as a program with different sites and the efficiencies and the economies of scale that drives. So yes, multiple projects by next year, Jamie, I don't have in my mind what percentage of the backlog, but it's going to be certainly one of our growth engines.

Probably a little less focus on the nuclear side in terms of backlog growth over the next 2 years. But again, that's a market that we continue to stay close to and to hone our CV so that if the renaissance does, in fact, materialize in a meaningful capital way, we'll be hanging around the hoop for that.

The next question comes from Sangita Jain with KeyBanc Capital Markets.

First, can I start with the FEED on the U.S. LNG plant. I think in the past, you've referenced hesitancy on taking fixed price risk on U.S. LNG project. So if this project does turn into EPC, will it be fixed price? Or are you thinking cost reimbursable?

This is a FEED for a scope that is not a train, this is an ancillary scope, it's still significant in size, but it's not in the magnitude that you're thinking a train or 2 trains would be. We're working on the FEED. And again, this will be another example where the eventual EPC contract will be negotiated in a way that risk is properly allocated. There probably will be some elements of it, lump sum, but again, it would be what we call smart lump-sum to make sure we're not taking blanket risks. But it's not by any means of the scale of, say, on LNG Canada. It's much smaller than that.

Got it. And then on the Urban Solutions margin outlook of 3% to 4% for 2026. I think in the past, you've referenced a higher margin range. So just kind of some color on whether it's a function of the projects that are burning this year? Or if there's a recalibration on your part on your Urban Solutions margin trends going forward?

Nothing kind of in the macro there that is causing that. As we had in the prepared remarks, we do have the legacy projects that are scheduled for handover, so it's pushing the finality of those out the door with maybe a little bit longer of a horizon than we had expected in earlier years. So it's really just the drag of those things, here in the final stages.

Your next question comes from Andy Wittmann with Baird.

Okay. I guess I'm going to ask one on cash flows, and then I'm going to ask one, I think, on corporate costs. So guys, just on cash flow, it looks like you've kind of articulated some of the moving pieces. John, thank you for that. You talked about the legacy burn. You talked about the cash tax payment here coming early in the second quarter for the new scale. One thing you didn't talk about was some of the JV cash and this has been a number that a couple of years ago was very large, and it's beginning small, but maybe if there's other moving pieces on the cash flows that we should maybe understand even if they're a little bit more minor, but particularly JV, maybe you could talk about that, please?

Yes. So you're spot on. So taxes are a big driver of cash flow, and it's that nuance of I pay in the succeeding year, the tax bill for the earlier year. So having consumed a fair bit of those tax attributes that we've talked about, we're going to be a little more regular way taxpayer beginning in 2026. So we will see some cash outflow there. On the JV distribution front, not much in the way of expected changes coming out of Mexico. We are expecting a slight uplift in almost nuisance percentage, but roughly comparable to slightly up coming out of Savannah River. And then in LNG Canada, we are expecting that to come backwards. We're expecting probably $60-ish million less in distributions coming out of Canada as that project is winding down and we make the final distributions accordingly. But given the lower effort that we've had in recent quarters, not surprising that the distributions themselves are coming down as that project nears completion.

Okay. And then, I guess, maybe it's a little bit of a moot point because you gave guidance on your G&A expense. I'm just trying to understand the moving pieces in the fourth quarter as well. You had an environmental liability in there, you had your normal FX number in there that are both notable items. It feels like there was a reversal on incentive comp because otherwise, your corporate G&A number, if I adjust for those 2 items, it seems kind of too low. So maybe just thought I'd have you talked about that one. And do you expect that there will be more restructuring in 2026 at all that we should be contemplating?

Yes. So a lot in there. So the core cost guide, you are correct, there was some reversal of the stock-based compensation. That was related to, in part, overall corporate performance vis-a-vis our internal targets. That will also -- was a factor from the decrease in share price during quarter 4. And so we have several of our equity awards that received a liability treatment. So those are constant mark-to-market. So we did see some impact there. And I think our expectation for the 2026 guide is that we're at something closer to the targets for 2026, which is why you do see a little inflection there. You called out the restructurings that we're in there with respect to 2026, I would say our restructurings in 2025 were more largely geographic. There was a little bit of a tail on some of the Stork stuff, but we looked at where we were operating in the offices we needed, and we took some restructurings around those. I think as we get into 2026, we may still have some modest tail of those things, but I wouldn't expect them to be anywhere close to the $40-ish million we spent in '25. So again, bit of a nuisance, but there will be some, but I don't expect them to be material.

Got it. Sorry, if I could just sneak one more in here. Just the Mission Solutions margin guidance seems to have perked up here at 6%. Obviously, there's lots of factors that can go into this one as well. But I was wondering if there's anything discrete that we should be thinking about as to driving that margin higher than what we've seen maybe over the years?

Yes. Essentially, it's the performance on Savannah River, which receives that equity method treatment. And so you're picking up some of the profit without corresponding revenue.

Your next question comes from Michael Dudas with Vertical Research Partners.

Jim, in your prepared remarks on Urban Solutions, you highlighted a couple of newer pharmaceutical clients. You called out data center, semi. So is the market demand for those services picking up to the point where it's coming into your ballpark on securing those types of terms and conditions that will lead to booking growth this year. And on -- just on the pharma, how much is Lilly, they've mentioned that new plant in Pennsylvania all, is that -- are they still -- you're still able to aid to their cause given all the work that you've done?

Thanks, Michael, for the question. Let me go in pieces here. Yes, we continue to be very excited about the Urban markets and ATLS. Semiconductors that is in our flywheel, those large complex projects. We're talking to clients about those projects, they're multibillion dollar complex facilities. So that is something we're pursuing very actively. Data centers, we've had, as you know, many comments in this forum around the data center market and Fluor's role in it. We continue to be very interested in data centers. We are pursuing data center work. We have 2 very good opportunities, one in the U.S. for a large project, one in Europe for project management services that were in advanced negotiations. We will remain selective in that market. A lot of the data center work in the U.S. is better suited for regional contractors or commercial construction-type contractors. But we think there's still good opportunities to pursue there, and we intend to grow in that market. And similarly, in pharma and life sciences, right now, we're executing a massive project for Lilly in Indiana. It's actually 2 projects in 1, and we are fully committed to making sure that project is successful. We're also chasing some other smaller facilities, still sizable projects, but not in the same scale. And as the Indiana job gets further ahead and there's line of sight on the completion then I'm sure we're going to continue to do more work in that area.

And my follow-up is, you've made terrific progress on your financial discipline and certainly, the contract terms is very good to hear. Utilities are being more accommodative in your longer-term goals that you've set out -- you set out in your term here. How do you feel about the growth aspect, the adjusted EBITDA growth over the next few years, the new business opportunities, is the demand in the market increased confidence leads you to more added confidence of achieving those goals as we move forward?

Mike, I feel very good about them. I feel very good because I'm confident that we're -- we have the right capabilities aimed at the right markets. The uncertainty and the disruption we saw last year in Q2, Q3 has gone a lot better. I think our clients are getting used to the trade policy flux and I think it's perhaps a new normal. And so they're looking past it and making plans for their CapEx programs. We have great end markets, and we talked about power, we talked about copper in the past, the copper demand, I think there's going to be an increase in copper demand, 30%, 35% in the next 5 to 10 years. Someone needs to build those facilities. We're the world leader in copper projects in the U.S., the manufacturing boom on life sciences, data centers, semiconductors and other types of facilities. Our work in government fairly diversified across multiple agencies. So I feel very good. I think we -- in our projections, Mike, we are still targeting the 2028 objectives that we laid out a year ago. Yes, there's a 4 quarter slide, if you will, due to 2025 events, but we feel very good about our 2028 objectives.

[Operator Instructions] Your next question comes from Andrew Kaplowitz with Citi.

This is Natalia on behalf of Andy Kaplowitz. Maybe first question that I'll ask, your backlog ended over $25 billion. Can you provide more color on the conversion rates by segment for 2026? And how much of that backlog do you expect to convert to revenue in the next 12 months, would be helpful.

Well, I think it's -- in terms of how much of the backlog will convert to revenue that's in that 50% to 60% range. And despite maybe an apparent wide gap there largely hinges on execution and client furnish materials and other things that could have significant impacts within that range. So I don't attempt to evade the question, but it's a high percentage of that backlog will drop.

Got it. That's helpful. And then just curious, right, with the significant NuScale proceeds expected, how are you weighing share repurchases against your capital allocation framework? Or in other words, just curious about maybe an updated color on your pecking order? And just as a follow-up to that, you mentioned strategic investments in M&A. I'm just curious if there's any specific gaps in your current portfolio that you'd like to fulfill with M&A?

Yes. I'll take that one. So I don't think we have a material shift in the way we were thinking about it and what we presented last April. And so back then, we said at the early part of the capital returns we're going to be weighted towards share repurchases. And I think we delivered on that in '25, and I think we've got a lofty goal in '26 with respect to the $1.4 billion. I think as we get later into the planning cycle, then we will have increasing EBITDA and free cash flow, and we will look to redirect those back to shareholders. And so there is probably some diminishing returns of the long haul of share repo. And so we'll look at other ways to deliver value for shareholders. And so my pecking order is kind of reinvesting in our own business as I said in the prepared remarks, building additional expertise and depth inside our human capital structure and then reviewing the tuck-in opportunities and so the tuck-in opportunities shouldn't be viewed as expanding into brave new markets, but again, adding depth to the markets that we have placed a priority on. And we've chosen the word tuck-in carefully so as not to convey an inappropriately large size of an acquisition. So we do see opportunities on smaller scale acquisitions in several of our businesses. So that's how we're thinking about it.

Okay. That's helpful way to think. And maybe one last question on my end. Just taking a step back, are you advanced from a Fix & Build approach to grown executive strategy so I'm just curious, can you talk about which end markets you feel you regain competitive advantages and which markets you're still seeing maybe more competition and pricing pressures?

Let me start with that, Natalia. We try to pick only markets where we think we have an advantage. And so if you look at LNG in Canada, if you look at copper, if you look at nuclear fuels, if you look at DOE work, if you look at other large projects and other technologies, but projects that really demand Fluor scale set of complex project execution from front end all the way to construction. That's what we're targeting for. We had -- as you know, Natalia, we've had a lot of discussions on data centers. That is a fairly new market to us, and we're a little bit behind catching up there. I'll admit to that. But again, we're maintaining that discipline where we're only going to go after projects where we think we have a high chance of success. So what am I most excited about and where do I think our strongest opportunities are in these projects that we're -- we've been cultivating in these markets that I just mentioned because I think we really provide a competitive advantage there and clients are willing to pay for that value.

This concludes the question-and-answer session. I'll turn the call to CEO, Jim Breuer, for closing remarks.

Thank you, operator, and many thanks to all of you for participating today. As we enter 2026, we're excited about the future, given our capabilities, the macro environment for EPC services and our competitive positioning. We appreciate your interest in Fluor and thank you for your time.

This concludes today's conference call. Thank you for joining. You may now disconnect.